INTC about to miss earnings due to AMD Epyc server growth
I previously called a technical breakdown in INTC following the competition of the ascending triangle. INTC subsequently fell, but has not yet hit its full down-side price target and has rallied a bit. This is a textbook Elliot Wave zigzag correction pattern and for fundamental reasons I see the final leg of the correction about to breakout, once again to the downside.
AMD just reported strong Q2 earnings after market close on 7/25/18, their best profits in seven years, on the strength of their new product portfolio. Most troubling for INTC is their growth of over 50% in their new Epyc server processors, which they attributed to growth in "Mega-data centers." This TAM is INTC's bread and butter and they have enjoyed essentially 100% control of that TAM which AMD is now starting to chip away at. I expect INTC's quatertly earnings report to show this when they report after-hours today, 7/26/18.
As far as trade entries go, I expect INTC to open sharply down today, more to do with the general tech dump following FB's disappointing earnings report. I do not think the loss of server market share will be priced in due to competition from AMD. So essentially, don't be afraid to chase this down a bit, but watch out for any recovery in FB, which will likely whip-saw up and down over the next few days, which could bring INTC back up from any drop at open. I will be playing this as a short-term earnings play and a medium term play as I think INTC is a good short with a soft backdrop in tech and the S&P500 emerging.
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As always, the responsibility for managing your position is your own. I am not a financial adviser nor is any content in this post intended to be financial advice. The information presented is my opinion, based on tools I have learned from others sharing their opinions and my experience in the markets. I share these ideas to generate discussion and have others critique my analysis because, as always, I am still learning. With that in mind, the outcome could be quite different than what I am predicting and this is for informational purposes only. It should not be considered financial or investment advice of any kind. Readers should consult with a financial or investment professional to determine what may be best for their individual needs.
AMD just reported strong Q2 earnings after market close on 7/25/18, their best profits in seven years, on the strength of their new product portfolio. Most troubling for INTC is their growth of over 50% in their new Epyc server processors, which they attributed to growth in "Mega-data centers." This TAM is INTC's bread and butter and they have enjoyed essentially 100% control of that TAM which AMD is now starting to chip away at. I expect INTC's quatertly earnings report to show this when they report after-hours today, 7/26/18.
As far as trade entries go, I expect INTC to open sharply down today, more to do with the general tech dump following FB's disappointing earnings report. I do not think the loss of server market share will be priced in due to competition from AMD. So essentially, don't be afraid to chase this down a bit, but watch out for any recovery in FB, which will likely whip-saw up and down over the next few days, which could bring INTC back up from any drop at open. I will be playing this as a short-term earnings play and a medium term play as I think INTC is a good short with a soft backdrop in tech and the S&P500 emerging.
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As always, the responsibility for managing your position is your own. I am not a financial adviser nor is any content in this post intended to be financial advice. The information presented is my opinion, based on tools I have learned from others sharing their opinions and my experience in the markets. I share these ideas to generate discussion and have others critique my analysis because, as always, I am still learning. With that in mind, the outcome could be quite different than what I am predicting and this is for informational purposes only. It should not be considered financial or investment advice of any kind. Readers should consult with a financial or investment professional to determine what may be best for their individual needs.
From a technical perspective, the C wave is quite clearly underway, and it has a bit further to travel as well. I am comfortable shorting to $45.
I wanted to address a couple of errors, as I wrote this up rather hastily early in the morning after AMD reported their earnings, which gave me the catalyst I was looking for.
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CORRECTIONS:
I mentioned in the first paragraph the "ascending triangle breakdown" I meant to say "ascending wedge."
Most importantly: the conservative price target for the C wave, based on a 1:1 A to C ratio is $44.18 and I should have reduced that target zone. To be clear, I think its possible INTC hits as low as the green support line just above $38, but that is somewhat more unlikely or would take a broader market correction to get there.